Question

QUESTION 6 Ang company that produces pleasure boats has decided to expand one of its lines. The company is considering three Location alternatives. The cost structure for each location is given as shown in the table. Location Fixed variable Costyr cost/unit LI 9.687 1.8 L2 6,358 2.8 L3 4,600 4.3 (Ex. In whole (Ex. In whole a) The range of output for location alternative I that would yield the lowest total cost is number, use Q. <<-> to specify the range) b) The range of output for location alternative 2 that would yield the lowest total cost is number, use Q,< ,,>, > to specify the range) c) The range of output for location alternative 3 that would yield the lowest total cost is number, use Q. <,<,>, > to specify the range) d) The alternative would yield the lowest total cost for an expected annual volume of 4505 boats is location (Ex. type in as LI, L2, or L3) (Ex. In whole

Answer 1

The comparison graph is shown below

100000 90000 80000 70000 60000 L1 50000 L2 40000 L3 30000 20000 10000 0 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637

a)

The point of intersection between L1 and L2 is (9687-6358)/(2.8-1.8) = 3329

Correct answer is >3329

b)

The point of intersection betwen L2 and L3 is (6358-4600)/(4.3-2.8) = 1172

The point of intersection between L2 and L1 is 3329

Correct answer is >1172 and <3329

c)

Remaining is the correct answer

Correct answer is <1172

d)

We have already found that above 3329, L1 is the best option

Correct answer = L1